The board of the International Monetary Fund (IMF) said on Wednesday it completed the second and final review of Egypt’s economic reform programme, allowing to disburse a $1.7 billion financing.
This brings the total financing under a 12-month Stand-By Arrangement (SBA) to $5.4 billion, or 184.8 per cent of quota, the Washington-based lender said in a statement.
On June 5, IMF reached a staff-level 12-month SBA agreement with Egypt to help the North African country grapple with the pandemic and its economic fallout.
“The Egyptian authorities have managed well the economic and social impact of the COVID-19 pandemic.” Antoinette Sayeh, the IMF’s deputy managing director and acting chair, said.
“Proactive economic policies shielded the economy from the full brunt of the crisis, alleviating the health and social impact of the shock while maintaining macroeconomic stability and investor confidence.”
“The economic recovery is under way, but the outlook is still clouded by uncertainty related to the pandemic. High public debt and large gross financing needs leave Egypt vulnerable to shocks or changes in financial market conditions for emerging markets.” Sayeh added.
Egypt’s economy is expected to expand by 2.8 per cent in the financial year ending June 30, 2021, and accelerate 5.2 per cent during the 2021-22 financial year, according to IMF recent projections.
The IMF pointed out the need for deepening and broadening structural reforms to address post-pandemic challenges, strengthen buffers and unleash Egypt’s “enormous growth potential”.
The IMF’s executive directors recommended continuing efforts to ensure debt sustainability, boost transparency and governance, and undertake structural reforms to build a greener, digital and more inclusive economy.
“The authorities’ national structural reform plan aims to achieve strong private sector-led growth to create durable employment and improve external resilience.” the executive directors said.
“This will require sustained efforts to improve resource allocation by reducing the role of the state in the economy, enhancing governance and transparency, improving the business environment, deepening financial markets, and increasing integration into global trade.”
The Central Bank of Egypt’s data-driven approach to monetary policy has helped keep inflation below its target range, Sayeh noted. This provides scope for monetary policy to further support the economic recovery as warranted by inflation and economic developments.
“Two-sided exchange rate flexibility is essential to absorb external shocks and maintain competitiveness,” she added.
Egypt’s banking system remains resilient, having entered the crisis well-capitalised and with ample liquidity, the executive directors stated.
“As crisis-related measures are unwound, continued supervisory vigilance will be needed to closely monitor lending standards,” Sayeh said.
